CNA L&P - Moving Money: Two options for recording bank transfers

What is the best way to record a transaction to represent moving money from Bank Account A to Bank Account B?

You must choose from the following options. Follow the option which best matches your actions.

 Option 1: If you need to deposit a check from Bank Account A into Bank Account B

1. Create a Bill with Bank Account B as the Vendor and using a Distribution Account* as the line item (You must choose which account from your COA to use as the Distribution Account).
2. Create the check using Bank Account A
3. After making the Deposit into Bank Account B, record the Deposit into Bank Account B, using a Distribution Account* to offset the deposit.
4. Each transaction will now show up in each Bank's Reconciliation

*Distribution Account: This may be a Dedicated Account, Net Asset Account, Transfer Account, or another Account your Accountant advises you to use. If using a Transfer Account, the same account would be used in both the Bill/Check and the Deposit. If using any other type of account, you would use different accounts in the Bill/Check than you would use in the Deposit. Please consult an accountant if you are uncertain which to use.

 

Option 2: If you have transferred the money electronically:

1. Create a Journal Entry
2. Credit Bank Account A for the Amount of the Transfer
3. Debit Bank Account B for the Amount of the Transfer
4. Each entry will now show up in each Bank's Reconciliation

Note: If the transfer includes a Dedicated Account, a Net Asset Account, or any other type of Account in addition to the Bank Accounts, you must have four entries. Two entries will be Bank Accounts as shown in Option 2 above. Two entries would be for non-asset accounts. Dedicated Accounts act like Income & Expense Accounts in one. Therefore, you would Credit the one Dedicated Account into which the money is going, and Debit the other Dedicated Account out of which the money is coming. Please verify this transaction with an accountant.

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